sebi:EAD-2/AO/33-37/2013-14
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Facts / Headnote
Violation established; monetary penalty imposed jointly and severally
Provisions invoked
- s. 15
- s. 81
- s. 15H
- s. 15J
Regulations
- Reg. 11
- Reg. 2(1)(e)
- Reg. 12
- Reg. 11(1)
Parties
- Noticee No. 1
- Noticee No. 2
- Noticee No. 3
- Noticee No. 4
- Noticee No. 5
Holding
The Noticees violated Regulation 11(1) of the SAST Regulations by acquiring 14.5% shares on conversion of warrants on November 29, 2006, taking their holding from 38.94% to 53.44% without making a public announcement, and are liable for a monetary penalty of Rs. 15,00,000 jointly and severally under Section 15H of the SEBI Act.
Full text
Page 2 of 9 referred to as ‘Noticees’. Noticees No. 1 to 4 are promoter group entities and Noticee No.5 is one of the directors of KGL. Further Noticee No. 1 is the Managing Director. KGL issued 34 lakh and 6 lakh share warrants respectively to Noticee No.4 and 5 on December 17, 2005 and the same were converted into equity shares on November 29, 2006. Consequent to the conversion of warrants into equity shares on November 29, 2006, the aggregate shareholding of the Noticees went up from 38.94% to 53.44% i.e. by 14.5%. Upon such acquisition of shares of KGL, the Noticees were required to make public announcement of offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as 'SAST Regulations') but they failed to do so.
Page 3 of 9 show cause as to why an inquiry should not be held against them for the alleged violations. The SCN was sent to the Noticees by Registered Post which was delivered and acknowledged by the Noticees. It was alleged in the SCN that the Noticees failed to make public announcement of offer as required under Regulation 11(1) of SAST Regulations.
Page 4 of 9 (b) They have always maintained transparency in business and affairs and taken care of shareholders interest. They have a clean track record and no action has been taken against them by SEBI save and except the present notice under reply. (c) KGL, for the expansion/diversification programme of the business raised funds by issuing 40 lakhs warrants out of which 34 lakhs warrants were issued to Noticee No. 4 and the remaining 6 lakhs warrants were issued to Noticee No. 5 at a price of ` 87.24 per warrant. (d) The pricing of the warrants was done in accordance with the then applicable SEBI (DIP) Guidelines, 2000. Pursuant to provisions of section 81(1A) of the Companies Act, 1956 the allotment of 40 lakh warrants was approved by the shareholders of the company in the Extra Ordinary General Meeting held on December 17, 2005. Necessary disclosures in this regard were made to the Stock Exchanges by KGL. The shares so converted from warrants, were listed on BSE with effect from June 01, 2007. Necessary disclosures in this regard was made to the Stock Exchange and a public notice dated May 31, 2007 was also issued by BSE for the information and record on listing of new securities of the KGL. So, the factum of issuance of warrants, identity of allottees, price at which warrants were issued was in the knowledge of the public shareholders and within the knowledge of the stock exchanges. (e) Consequent to the conversion of warrants, there was no change in the control, managem
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Source: SecMarx — sebi:EAD-2/AO/33-37/2013-14. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.